MONTSAME national news agency, in cooperation with MICC Mongolia International Capital Corporation (MICC LLC), presents to its readers a weekly overview of Mongolia’s domestic capital market and economic developments.

Weekly Capital Market and Economic Review

(2026.05.18–2026.05.25)

 MONGOLIAN STOCK EXCHANGE

A total of 4.9 million securities worth MNT 4.6 billion were traded on the Mongolian Stock Exchange over the past week. In terms of trading value, Khan Bank JSC, State Bank JSC, Mongolian Stock Exchange JSC, Innovation Investment JSC, and Golomt Bank JSC led the market. During this period, one block trade was executed:

1 million shares of State Bank JSC (TGI) were traded at MNT 442 per share, totaling MNT 442 million.

Last week, the Mongolian Stock Exchange indices closed with mixed performance, with selective buying observed in the market. The TOP-20 index rose by 0.58% to reach 50,961.19 points, while the MSE B index increased by 0.65%, indicating a modest recovery in demand for small-cap stocks. Meanwhile, the MSE A index declined by 0.12%, reflecting relatively stable movement among large- and mid-cap stocks, alongside ongoing profit-taking.

Market behavior suggests that investors are adopting a more selective stance, gradually shifting from highly liquid stocks toward segments with higher growth potential.

ECONOMIC GROWTH REMAINS DRIVEN BY MINING AND FINANCING

According to the preliminary results for the first four months of 2026 released by the National Statistics Office, Mongolia’s economic growth continues to be primarily supported by mining, exports, and financial inflows.

Total industrial output increased by 54.1% to reach MNT 21.8 trillion, while exports surged by 60.6% to USD 6.8 billion. At the same time, total turnover in the securities market rose 2.2 times, indicating strong financing activity through the capital market.

Key indicators:

Total industrial output grew by 54.1%, led by a 67.5% increase in mining production.
Securities market turnover reached MNT 563.7 billion, up 2.2 times year-on-year.
Inflation rose to 10.1%, with food prices increasing by 19.4%, placing pressure on household consumption.
GDP grew by 8.0% in the first quarter of 2026 (at constant prices), with mining contributing the largest share.
 Although exports and industrial growth remain strong, manufacturing growth was only 8.4%, indicating uneven distribution of growth across sectors. A decline in the physical volume index suggests that high commodity prices have been a key driver of overall growth.

In the labor market, the unemployment rate rose to 5.7%, while the labor force participation rate declined to 60.4%. Persistent double-digit inflation continues to weigh on domestic consumption and households’ real purchasing power.

In the capital market, primary market transactions accounted for 65% of total turnover, reflecting strong corporate activity in raising funds through the market. However, secondary market growth remains relatively weak, indicating that liquidity and participant activity have yet to fully expand.

While revenue expectations for mining-related companies remain high, stocks linked to domestic consumption and manufacturing on the Mongolian Stock Exchange continue to show more selective growth patterns.

BUDGET REVENUE RISES, BUT DEFICIT REACHES MNT 1.4 TRILLION

According to preliminary data for the first four months of 2026, total government consolidated budget revenue and grants reached MNT 10.2 trillion, an increase of 13.8% (MNT 1.2 trillion) compared to the same period last year. Meanwhile, balanced revenue and grants amounted to MNT 8.9 trillion, reflecting a 5.4% annual increase.

Despite continued revenue growth, total expenditure and net lending reached MNT 10.4 trillion, resulting in a balanced budget deficit of MNT 1.4 trillion. This marks a significant shift from the surplus recorded during the same period last year, indicating that expenditure growth has begun to outpace revenue growth.

Key indicators:

Total budget revenue and grants: MNT 10.2 trillion (+13.8%)
Balanced revenue: MNT 8.9 trillion (+5.4%)
Total expenditure and net lending: MNT 10.4 trillion
Balanced balance: MNT -1.4 trillion deficit
Total tax revenue reached MNT 8.3 trillion, up 4.3% year-on-year, driven mainly by a 17.6% increase in social insurance revenue and a 5.8% rise in VAT revenue. However, personal income tax revenue declined by 5.7%, and excise tax revenue dropped by 28.6%, reflecting weaker domestic consumption and import activity.

In terms of revenue structure, 29.9% came from income tax, 23.4% from VAT, and 23.4% from social insurance contributions. Meanwhile, total budget expenditure increased by 32.5% compared to the same period last year, with notable rises in both current and capital spending.

Although strong economic growth and mining export revenues are supporting budget income, faster growth in expenditure is increasing fiscal pressure. For the capital market, a rising budget deficit may lead to greater government reliance on domestic bond financing, potentially increasing the supply of fixed-income instruments in the market.

CENTRAL BANK ADJUSTS RESERVE REQUIREMENTS ON EXTERNAL FUNDING

The Monetary Policy Committee of the Bank of Mongolia has decided that, starting October 1, 2026, 25% of foreign currency bonds and loans with maturities between 360 days and 3 years raised by banks from international markets will be included in the base for required reserves.

Previously, these funding sources were fully excluded from the reserve requirement base; under the new regulation, only 75% will be excluded, while reserves will be calculated on the remaining 25%.

The Bank of Mongolia stated that this measure aims to reduce vulnerabilities arising from currency and maturity mismatches in the banking sector and to mitigate risks associated with excessive reliance on short- and medium-term external funding. Studies show that in developing countries, accumulated mismatches in assets and liabilities can increase systemic risk.

Currently, approximately 19% of the banking sector’s total funding comes from foreign bonds and loans, while the loan-to-deposit ratio has reached 138%, indicating a growing reliance on external financing alongside domestic deposits.

The central bank also noted that stress test results show that even under major macroeconomic shocks, the banking system’s capital adequacy would remain at a sound level. Meanwhile, non-performing consumer loans have stabilized in recent months, and the volume of loans under special mention has begun to decline.

From a capital market perspective, this decision is expected to increase the cost of short-term external funding for banks and raise the need for domestic funding sources. For banks listed on the Mongolian Stock Exchange, factors such as funding structure, net interest margins, and external debt levels are likely to attract greater investor attention.

Published Date:2026-05-27